Credit Suisse Books $60 Million Loss On Canada Goose
As we reported late last year, shares of Canada Goose - which had previously been one of the best performing stocks listed in Toronto - slumped after China's domestic press called for a boycott of the brand following the arrest of Huawei CFO Meng Wanzhou in Canada, just as the company was preparing to open its first mainland-based stores.
Unfortunately for Canada Goose shareholders hoping for a quick rebound, CG has continued to struggle into the new year, which has been bad news for the big banks who underwrote the retailers late-2018 IPO. And of those banks, none have been hit quite as hard as Credit Suisse, the lead underwriter on the IPO, which lost about $60 million late last year when it was left holding the bag after CG's shares shed more than 20% in a dizzying selloff.
Credit Suisse, which acted as underwriter on the sale of 10 million shares by Canada Goose Holdings Inc. stockholders in late November, saw the value of the stock tumble after the arrest of Huawei Technologies Co’s finance chief in Canada prompted a diplomatic dispute between the two countries, the people said, asking to not to be identified as the loss isn’t public.
The offering was priced at $65.15 a share, a 1.85 percent discount to the previous close, a person familiar with the matter said at the time of the deal in late November. The arrest of Huawei Technologies Co.’s finance chief in Vancouver on Dec. 1 prompted Chinese websites to call for a boycott of Canadian brands and a 20 percent four-day losing streak for the stock later that month.
Instead of sticking it out, CS sold the shares at a loss (after all, CS was one of the first big investment banks to warn that markets might be underestimating the ramifications of slowing economic growth in China). After selling the shares in a block trade, CS said its full-year guidance for 2018 remained unchanged.
The bank eventually sold the Canada Goose shares it held at a loss, the people said. Credit Suisse declined to comment on the details of the trade but said that its full-year guidance for reported pretax profit of 3.2 billion francs to 3.4 billion francs for 2018 remains unchanged.
The blowback from the IPO fiasco is one more reminder why CS has been scaling back its trading business to focus on wealth management.
Credit Suisse has scaled down its trading business to focus on wealth management. The lender, led by Tidjane Thiam, just completed a sweeping three-year restructuring program and is now trying to convince investors to stick with the bank by pledging capital returns and growth in profits.
The relationship between Ottawa and Beijing has further deteriorated since late last year, and with the US reportedly planning to formally request Meng's extradition, there could be more pain ahead for CG.
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Sounds alot like goldman sachs and webvan. Hank Paulsen said it was the future except he forgot to tell everyone else that they shorted it after the lockup expiration.
https://www.zerohedge.com/news/2019-01-25/credit-suisse-books-60-million-loss-shares-canada-goose